If you are a smaller B2B business with an innovative technology, service, or product, chances are good that you will have to present your innovation to larger companies. You want these companies to see how amazing your creation is because the goal is to get them to pay you to use it.
According to Zest Labs, this is essentially what happened to them in 2014. They demonstrated their cold-chain management technology that extends the shelf life of produce to Walmart executives. A few months later, the two businesses entered into a confidentiality agreement.
That is where things stood until early 2018, when Walmart released a produce shelf life solution called Eden. Zest Labs felt that Eden “look[ed], sound[ed], and function[ed]” a lot like their solution, so they filed a $2 billion lawsuit against the retailer that year for stealing their technology.
After three years, the jury in that case sided with Zest Labs and ordered Walmart to pay them $115 million. Unhappy with that decision, Walmart requested a new trial, and in late 2023 an Arkansas federal judge agreed after finding that relevant evidence was withheld from the original trial by Zest.
At the time, it seemed like a win for Walmart, and things appeared to be trending in the retail giant’s favor. So, how did that turn into a second decision in favor of Zest Labs that nearly doubled their original award?
‘Willful and Malicious’ Trade Secret Misappropriation
In this most recent verdict – which was unanimous – Walmart was ordered to pay Zest Labs $72.7 million for damages related to trade secret misappropriation. The other $150 million they owe is for exemplary damages.
What does that mean? Essentially, despite whatever was in that “relevant evidence” Zest Labs withheld from the original case:
- The company was able to once again prove that trade secret misappropriation took place by Walmart.
- The retailer acted in a manner that jurors deemed “willful and malicious,” according to court documents.
By fighting for a new trial after losing the initial one, Walmart put itself in a position where its payout is almost twice as high. Of course, they are not finished yet. The retail powerhouse has promised to appeal the verdict, setting the stage for yet another showdown.
What is the lesson here?
For huge corporations like Walmart, it is quite possible you might be researching and developing a variety of products and technologies while still taking meetings with companies working on similar projects. If this is the case, it is absolutely vital to maintain a detailed record of your internal progress in addition to clear documentation related to those meetings.
Zest Labs keeps winning because there is at least the strong appearance of Walmart learning about the smaller business’s innovation and then reengineering it as their own product. The way to battle that argument? Offer proof that you were developing it long before meeting with the outside company and that your own plans were not influenced by that meeting.
For smaller businesses looking to protect their trade secrets? Make sure you use all of the legal protections at your disposal (such as confidentiality agreements) and keep fighting. One strategy that large companies like to employ when hit with a lawsuit is to keep litigation going until the other side runs out of money. So far, Zest Labs has not only been able to battle through multiple cases with Walmart – they have drastically increased the payout they should ultimately receive.
Do you have a trade secret situation you are dealing with? Get in touch for a consultation and learn how I can help.